worldsteel Short Range Outlook 2014-2015

09.04.2014

London

The World Steel Association (worldsteel) today released its Short Range Outlook (SRO) for 2014 and 2015. worldsteel forecasts that global apparent steel use will increase by 3.1% to 1,527 Mt in 2014 following growth of 3.6% in 2013. In 2015, it is forecast that world steel demand will grow further by 3.3% and will reach 1,576 Mt.

Chairman of worldsteel Economics Committee, Mr Hans Jürgen Kerkhoff said “In 2013 world steel demand grew higher than our previous forecasts due to a stronger than expected performance in the developed world in the second half of the year. In particular, the recovery in the United States gained strength. In addition the downturn in the EU bottomed out and we now expect that steel demand in the Eurozone will move into positive growth in 2014. On the other hand, many emerging economies continue to struggle with structural issues and financial market volatility. This, along with China’s deceleration, is the reason for our slightly lower global growth rate forecast for 2014. In 2015, growth in most parts of the world will accelerate thanks to a continuing steady recovery in the developed economies and an improvement in the situation for the emerging economies. But China’s steel demand will further decelerate and this will prevent the broad recovery momentum from registering a higher global growth rate for 2015.

We continue to see challenges. The recovery in Europe is still only mild and constrained by high debt and unemployment. Structural problems in the emerging economies are less likely to be resolved in the short term leaving them fragile and susceptible to external shocks. We are still seeing unexpected unstable political situations in many emerging economies. In this regard, the development involving Crimea raises a high downside risk for our outlook for the CIS region. Finally issues remain surrounding China’s debt and real estate bubble.

In short, the global steel demand recovery continues but growth is stabilising at a lower rate with continued volatility and uncertainty leading to a challenging environment for steel companies.”

After growth of 6.1% in 2013 with support from government infrastructure investment, apparent steel use in China is expected to slow to 3.0% growth in 2014 to 721.2 Mt as the Chinese government’s efforts to rebalance the economy continues to restrain investment activities. In 2015, steel demand growth is expected to further decelerate to 2.7%.

In India, steel demand is expected to grow by 3.3% to 76.2 Mt in 2014, following 1.8% growth in 2013, due to an improved outlook for the construction and manufacturing sectors, even though this will be constrained by high inflation and structural problems. Despite uncertainties relating to the impact of upcoming elections steel demand is projected to grow by 4.5% in 2015 supported by the expectation that structural reforms will be implemented.

Following a 2.0% increase in 2013, because of the moderate GDP recovery as a result of “Abenomics”, apparent steel use in Japan is expected to contract by -1.0% to 64.6 Mt in 2014 due to the consumption tax hike affecting the construction and automotive sectors negatively. In 2015, steel demand is expected to increase by 0.5%.

In the United States, after a decrease of -0.6% in apparent steel use in 2013, years 2014-2015 are expected to deliver a return to growth and recovery. Apparent steel use will grow by 4.0% to 99.4 Mt in 2014 and by 3.7% in 2015. The impact of the Federal Reserve Bank tapering programme on the US economy has been contained so far, but future actions still remain a risk. Apparent steel use in Mexico is expected to grow by 3.4% to 19.2 Mt in 2014 and to grow further by 3.9% in 2015.

In Central and South America, apparent steel use is projected to grow by 3.4% to 50.9 Mt in 2014 down from 4.3% in 2013. This is forecast to slow further to 2.7% in 2015 due to contraction in Argentina and a sharp slowdown in Chile. In Brazil, steel demand growth will slow to 3.0% to 27.2 Mt in 2014 and 3.2% in 2015 as high inflation and interest rates continues to restrain economic growth.

After a contraction of -0.2% in 2013, apparent steel use in the EU (28) is expected to grow by 3.1% in 2014 to 143.3 Mt with help of the construction sector which is gradually bottoming out. Underlying trends at national level will continue to differ, but it appears that Southern Europe has passed its lowest point. Apparent steel use in Germany is expected to increase by 4.5% in 2014, Italy by 2.6%, France by 1.0% and Spain by 3.0%. A steady transition to a broader and more durable recovery will result in steel demand growth of 3.0% in EU (28) in 2015.

Apparent steel use in the CIS region is projected to grow by only 1.1% reaching 59.5 Mt in 2014 due to slow investment, but will grow by 3.7% in 2015 with Russian steel demand accelerating to 4.4% growth. Steel demand in Ukraine will continue to contract in 2014 but the fall will be limited to -3% to 5.4 Mt due to financial assistance from the International Monetary Fund.

In the MENA region, steel demand is expected to grow by 6.1% to 66.7 Mt in 2014 after a 0.9% increase in 2013. Growth in the region is strengthening as political uncertainties moderate. Strength in the non-oil sector in the GCC (Gulf Cooperation Council) countries is expected to stretch into 2014 and the Egyptian economy as well as the rest of the region will continue to recover. In 2015, steel demand in the region is expected to grow by 9.4%.

Overall apparent steel use growth in the developed economies will be above 2% in 2014 and 2015, however the developing and emerging economies will continue to grow faster than the developed economies despite their more subdued performances.

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Notes to Editors:

The World Steel Association (worldsteel) is one of the largest and most dynamic industry associations in the world. worldsteel represents approximately 170 steel producers (including 17 of the world's 20 largest steel companies), national and regional steel industry associations, and steel research institutes. worldsteel members represent around 85% of world steel production.

The projections forecast by worldsteel consider both real and apparent steel use. Apparent steel use reflects the deliveries of steel to the marketplace from the domestic steel producers as well as from importers. This differs from real steel use, which takes into account steel delivered to or drawn from inventories.

The Short Range Outlook is provided by the worldsteel Committee on Economic Studies which meets twice a year. The Committee membership consists of chief economists from more than 40 of the worldsteel member companies. The Committee considers country and regional demand estimates to compile a global overview on apparent steel use (ASU). The Short Range Outlook is presented to the Board for their final review before publication.